Barclays lets shareholders in on Mideast stock

Barclays PLC moved to appease shareholders Tuesday, saying it will let existing stockholders in on a share issue originally earmarked for private Middle Eastern investors and that it won't pay its top executives any annual bonuses this year.

Last year, the bank's top-paid director, investment banking chief Robert Diamond, received a bonus of nearly 21 million pounds on top of a basic salary of 250,000 pounds. Chief Executive John Varley pocketed nearly 5 million pounds beyond his 975,000 pound salary.

Barclays said its existing stockholders will be allowed to purchase up to 500 million pounds ($750 million) in preference shares, which pay a high annual interest rate of 14 percent, that had been previously earmarked for private investors in Qatar and Abu Dhabi.

"The board of Barclays has listened carefully to shareholders' views," the bank said in a statement. It added that all members of the board would offer themselves for re-election at the bank's annual general meeting in April.

The preference shares will come out of planned investments by three Middle Eastern investors — Qatar Investment Authority, the Challenger investment vehicle led by the Qatari royal family, and Sheik Mansour Bin Zayed Al Nahyan of the Abu Dhabi royal family — reducing their combined proposed investment from 5.8 billion pound ($8.7 billion) to 5.3 billion pounds ($8 billion).

Over the past week there had been growing evidence that current shareholders could vote against the proposed Mideast investment when it is put up for their approval on Nov. 24.

On Monday, key shareholder advisory group PIRC told shareholders to vote against the Mideast capital raising plan. PIRC said the proposed capital injection represents a "significant dilution" of the holdings of existing shareholders. Last week, another shareholder advisory group, RiskMetrics, also voiced concerns about the deal.

Barclays management agreed to take investments from the Middle East last month rather than participate in the government's recapitalization plan, which was taken up by rivals Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC.

Those banks all agreed to cede major stakes to the government in return for a combined 37 billion pound ($55 billion) cash injection from the British Treasury.

The market initially welcomed Barclays' decision to remain independent of the government, but investor advisory groups have since questioned whether the government deal would have been better than the one it signed with the investors from Qatar and Abu Dhabi.

The Mideast investors have been promised 14 percent annual interest over 10 years for preferred stock and the chance to buy 2.8 billion pounds ($4.2 billion) of common shares at a discount. The government plan requires banks to pay a lower 12 percent annual interest on preferred shares, which the banks can buy back at any time.

Tuesday's announcement lets ordinary stockholders in on the high interest rate that the Mideast investors have been promised and so should calm shareholder concerns that they are losing out as a result of the bank's decision to shun the government investment.

"Barclays has clearly recognized the concern emanating from some of its shareholders," said Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers. "Whilst the amount of capital being made available is relatively small, it should nonetheless quell most of these concerns."

Barclays' shares closed down 2.99 percent at 149.50 pence ($2.25).

Goldman Sachs Group Inc. and UBS AG have both previously announced that their top executives won't be getting bonuses this year.

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